METRANS Blog

Welcome to our METRANS Blog PERSPECTIVES series. We have asked our experts to comment on the Hanjing Shipping Co bankruptcy, which took place on August 31, leaving cargo laden ships stranded around the world. Here are three entries from our faculty port and maritime experts. As always, our blog entries do not represent the view of METRANS or our funding organizations.

Hanjin Shipping Company receivership filing is a dramatic sign of the distress facing the ocean carrier industry. While small container lines have come and gone in the recent past, such as The Containership Company, which called at the Trapac Terminal in Long Beach, the demise of the seventh largest ocean carrier reflects the inability of an industry to sustain year after year of losses due to low shipping rates and ship overcapacity.

For many years, the shipping industry has been in a situation of overcapacity, which was depressing rates and impairing the profitability of shipping lines. To make matters worse, almost every major shipping line was ordering larger containerships, caught in a vicious circle of trying to boost profitability with economies of scale. Capacity was growing faster than demand.

The question of broader supply chain disruptions as a result of the Hanjin bankruptcy, and our ability to predict them, was the subject of a recent Perspectives column in the Long Beach Business Journal by METRANS Associate Director Tom O’Brien. In the column, O’Brien argues that the supply chain needs to be ready to absorb shocks from continued consolidation in ocean carriage as well as from other key economic changes like those facing manufacturing.

Welcome to the METRANS blog. Our PERSPECTIVES series is intended to promote informed and open discussion of current transportation questions. We present entries from our faculty experts and guests that reflect different disciplines and points of view.

Looking at the graph (from the LA Times Jan. 27 article, shown above), the data are from 1985 to the present, showing a substantial decline through the early 1990a, when LA Metro and their predecessor agencies shifted funds from a bus system to the new rail system, and then increases which, with some ups and downs, have returned almost to the ridership levels of 30 years ago. That is not a ringing endorsement of Metro’s transit policies, but it is also not a new story. This is a long-term issue.

The LA Times study highlights that most public transit agencies in Southern California, including Metro, the largest regional carrier, have experienced declines in passenger boardings between 2006 and 2015. For some agencies, the loss looks quite dramatic. This is a problem because the agencies have all made substantial investments, with public dollars, over that period for expanding and improving their service, and Metro has spent $9 billion for its light rail and subway projects. So, it’s not unfair to ask whether Metro et al.

Last Friday, the Los Angeles Times published an article on the loss in transit ridership across the region. The article particularly targeted LA Metro, an agency which has seen a 10% drop after "$9 billion in rail transit investments." More details are available

We saddle transit agencies with inconsistent objectives. We use transit as a form of wealth transfer to ensure at least a minimum degree of mobility for everyone. We fund transit to keep people mobile enough to work, pay taxes, and participate in an orderly society. However, expecting transit services delivered by a highly subsidized producer to attract people who have the option to use a car is foolish, particularly when the transit services involved have been shielded from the market forces that would otherwise guide these services toward delivering what consumers want.

There are always questions about where you should slice data. The rail fans online have thrown a fit over the LA Times decision to begin in 1985, arguing that the numbers are misleading and that rail has been a success since 1995 in bringing people back to the system. If you look at the "ridership peak" graph (from the LA Times article), you’ll see that ridership has grown since 1995, not declined. Is that the right period to use to evaluate productivity? Or should we go all the way back to 1980 figures, which would make our current ridership look better than the 1985 beginning?